According to the American Trucking Association, the trucking industry employs more than 7 million individuals and is responsible for moving over 70% of cargo across the United States. Trucks move all kinds of goods from perishable foods and hospital supplies to medications and beverages. Without trucks, vital products would be difficult to access all over the country.
Most truck drivers have been dreaming of owning their trucks and starting their own business. According to research, 45% of business owners or potential business owners are not aware they have a credit score. Because of this, the truck drivers suffer, not knowing that they can access first time owner operator financing if they want to buy their trucks.
Owning a fleet of trucks is expensive, with the average cost being about $80,000 a truck. Fortunately, there are various options for first time owner operator financing with financial institutions. As a potential truck owner, you need to secure a truck loan.
Although banks do not prefer small business loans for truckers, there are various institutions that are willing to offer the first time owner operator financing for truck drivers who want to start their operations. From the basic level, commercial truck financing is made available for:
- Purchasing used or new truck
- Leasing an old or new truck
- Heavy-duty truck loans
Who qualifies for commercial truck financing
Obtaining commercial truck loans is a little different from getting traditional business loans. Whereas in regular loans, your credit score, revenue, and the duration you have run the business matter, with truck loans it is much different. The truck serves as the collateral, which in turn minimizes the risk for the lender. Getting financing with bad credit is possible and you should have no fear of starting your trucking business.
However, it is essential to note that there are variations around the rates and terms on semi-truck loans. If you are termed as the best borrower, you can easily qualify for 100% first time owner operator financing with interest rates being as low as 5%. Those with a bad credit score, although they are eligible for financing, they will be required to put a down payment, and their rate of repayments will be between 7% to 30%.
What affects your eligibility for financing?
Because the truck serves as the collateral for the lenders, the lender before agreeing to give you a loan will put a lot of value on the truck and its condition. You must always be sure and confident of the truck you need to lease or purchase. The lenders will look for the following:
- Is the truck a long-haul or a vocational one. Long haul trucks are also known as semi-trucks and are used over long miles to transport cargo while vocational trucks are for specific use like garbage trucks that are used within a particular area.
- Long-haul trucks are prone to more wear and tear, making it riskier to finance. The owner will be expected to use more money for its maintenance and should it break down; the owner may struggle with making monthly payments.
- The type of commercial truck you want to be financed. The condition of the truck also matters. An older truck equals to less valuable collateral. It is advisable if you need financing for an old truck to look for one that is less than ten years and has traveled for less than 600,000 miles. Most lenders will not be willing to offer truck financing for trucks not likely to last through the term of the loan.
Financing rates and terms
The general interest rates from truck financiers are between 5% to 30%, all based on the creditworthiness of the borrower, the financial state of the business, and the truck condition. The repayment period often goes up to 10 years, but if you get a loan from the bank, the repayment period can be longer.
If your dream has always been to own a trucking business, you don’t have to dream anymore and you can make this a reality. Whether your credit score is good or bad, you can get adequate financing and be on your way!